Release Date: August 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue growth of 32% in Q2 2024 compared to the same period in 2023.
- Total billable test volume increased by 31%, with approximately 21,000 tests conducted.
- Gross profit increased by 33% to $13.3 million, with gross margins improving to 60%.
- Expansion of the test menu, including tissue-based and liquid-based tests, contributing to growth.
- Raised 2024 revenue guidance to $85 million to $87 million, representing over 20% year-over-year growth.
Negative Points
- Operating loss of $7.4 million, though reduced from $7.7 million in Q2 2023.
- Cash and cash equivalents decreased to $21.3 million as of June 30, 2024.
- Integration of the GPS test post-acquisition from Exact Sciences was complex and time-consuming.
- Gross margin improvement was modest, only increasing from 59.7% to 60%.
- Potential seasonality and variability in Q3 performance due to patient flow and staffing.
Q & A Highlights
Q: Can you talk about the drivers of volume growth on both the tissue and liquid sides of the business? What are you seeing in terms of compliance towards the overall menu?
A: Our urology customer base has advanced significantly, moving from individual test trials to a more integrated pathway approach. Additionally, our engagement with pathology networks has strengthened, providing leverage as some pathology groups serve multiple urology practices. This dual engagement with urology and pathology is a compelling driver for our growth.
Q: How much room is left to move ASPs higher for the portfolio through market access and coverage decisions or improved revenue cycle management?
A: We have room to grow ASPs through both broader commercial private payer coverage and improved revenue cycle management. Often, coverage decisions precede medical policy, leading to favorable ASP adjustments. We see this trend across all our tests, driven by our sales and managed care teams.
Q: Can you provide qualitative color on relative areas of strength in the quarter, particularly for Resolve volumes?
A: We have moved from unit revenue by test to providing better visibility by segment. Tissue-based tests have higher Medicare rates and ASPs compared to liquid-based tests. We are seeing continued growth across our menu, particularly in Resolve, and believe this segmentation offers better visibility for comparison and guidance purposes.
Q: Why didn't the revenue growth translate to gross margin improvement as well as it has historically?
A: The variation in gross margin is due to the mix of tests and payer mix by quarter. There are no material changes; it's strictly a timing and mix issue.
Q: Where do you stand with the integration of the germline testing, and what steps are needed for it to contribute to revenue in H2?
A: We are in the limited launch phase, confirming our diligence and gaining experience with our sales organization. We expect to report revenue contribution in the second half of the year and will provide better visibility on its impact moving forward.
Q: What is your current outlook on expanding the testing menu further?
A: We continuously evaluate growth opportunities through a rigorous process. Our recent addition to the Board, Sandy Siegel, enhances our strategic outlook. We anticipate our menu will continue to evolve, reflecting market needs and opportunities.
Q: How does the pace of volume activity during the quarter inform your view of the second half of the year?
A: We view our growth as sustainable. While Q3 can be a wildcard due to seasonality, we do not expect any material downturn. Our guidance reflects confidence in achieving 20% or greater revenue growth sustainably.
Q: Are there efficiency benefits expected from the full consolidation of GPS operations?
A: We do not anticipate any material impact on the P&L from the consolidation of GPS operations. The transition was modeled to be neutral in terms of economics.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
